For Release: August 30, 1999
Use of Electronic Signatures by Customers of
FCMs, Clients of CTAs and Commodity Pool
Washington, D.C. -- The Commodity Futures Trading
Commission is seeking public comments on a proposed new rule 1.4 to
permit the use of electronic signatures in lieu of handwritten
signatures in those instances in which Commission regulations require the
signature of a customer of a futures commission merchant (FCM) or
introducing broker (IB), a participant in a commodity pool or a client of
a commodity trading advisor. The proposal would be consistent with the
approach taken in several bills pending before Congress and the Uniform
Electronic Transactions Act recently approved and recommended for
adoption in all the States by the National Conference of Commissioners of
Uniform State Laws.
An industry professional filed a request that the Commission amend its rule 1.55 to permit FCMs and IBs to accept electronically-signed acknowledgements from persons to whom they are required to deliver risk disclosure statements. Upon consideration of the request, the Commission determined that a more general rulemaking was appropriate to address the use of electronic signatures in other circumstances where a registrant is now required to obtain a signed document from a customer, participant or client. The permission to use electronic signatures under the proposed new rule would be given subject to compliance with applicable Federal laws and any standards or guidance the Commission develops. Registrants also would be required to employ reasonable safeguards against fraudulent use or alteration of electronic signatures.
In developing the proposed new rule, the Commission has adopted the "electronic signature" definition in the proposed Uniform Electronic Transactions Act. The Commission believes that it is an appropriate definition for the futures industry and that the likelihood that it or a similar definition will be adopted by the states in the near future decreases the chances that the proposed new rule will conflict with state contract law.
The proposal reminds registrants of their duties to obtain each customer's true name, address and occupation, and to maintain reproducible records. Registrants are further reminded that they must determine whether electronically signed contracts will be enforceable, and that the use of electronic signatures may affect their duties to report material inadequacies in internal controls and to supervise diligently the handling of accounts.
The Federal Register release specifically requests comments from the public regarding the advisability and timing of the proposed rule change, additional safeguards that may be appropriate, regulatory coordination issues and any additional issues that should be addressed in this area.
The Notice of Proposed Rulemaking will be published shortly in the Federal Register and will be posted on the Commission's home page (www.cftc.gov). The comment period will end sixty days after the date of publication in the Federal Register. Copies of the Notice of Proposed Rulemaking may be obtained by contacting the Office of the Secretariat, Three Lafayette Centre, 1155 21st Street, N.W., Washington, D.C. 20581, (202) 418-5100.